Pushpay shares jump after digital donation service recommends takeover offer

Monday, 31 October 2022

• Pushpay recommends takeover offer

• Offer values firm at $1.6 billion

• Shares jump 6.7%

Shares in digital donation service Pushpay were the biggest gainers on the sharemarket after the company recommended shareholders accept a takeover offer which values it at $1.6 billion.

In a statement to the NZX on Monday, Pushpay said it had agreed to a takeover offer from United States investment firm Sixth Street Partners and Australian private equity firm BGH Capital which together hold 20.3% of Pushpay shares.

The takeover offer of $1.34 per share in cash is a 30.1% premium to Pushpay’s share price on April 22, before tech stocks declined, with the ASX All Technology index having shed 12.1% and the NZX50 down 6.8%. The offer is a 13% premium to the last closing price of $1.19 on October 27.

Pushpay shares jumped 6.7% to $1.27 in midday trading on the NZX, making them the biggest gainer on the market, as well as the biggest stock traded by volume and value. The stock is down 32% over the past year, which brokers have said made it an attractive takeover target.

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The company’s $1.6b enterprise value takes into account its market capitalisation, as well as its debt and cash.

The firm was founded in 2011 by Chris Heaslip and Eliot Crowther as a fast and easy way to make donation payments to churches. It was valued at $50 million when it listed in 2014, and posted its first profit in 2019, although it continues to reinvest its cash for growth rather than pay dividends.

In recent times, the company has been investing in related services that it can provide to churches, such as a streaming platform, to accelerate its growth.

In a trading update released on Monday, Pushpay said in the first six months of its financial year to September 30 revenue grew at a slower pace than expected, up 10% to US$103m (NZ$174m), while costs were higher, with underlying operating profit down 10% to US$26.8m.

The company downgraded its expectation for profit this financial year, saying it now expects underlying operating earnings of US$54m to US$58m, down from its previous range of US$56m to US$61m.

It also lowered its forecast for revenue growth to 4% to 8%, down from its previous expectation for 10% to 15%.

Jarden analyst Guy Hooper lowered his forecasts following the update, noting it was the second US summer of disappointing customer growth.

“While both six-month periods faced challenges, another summer of disappointing customer growth is likely to dent market confidence in customer growth targets,” Hooper said.

“Recent customer announcements offer some encouraging signs of renewed traction in market, however, we think the company requires a stronger period of execution to rebuild confidence in targets.”

The proposed deal is subject to shareholder, court and other regulatory approvals.

Advisory firm Grant Samuel will prepare an independent report on the merits of the offer, which is expected to be sent to shareholders in the first quarter of next year, ahead of a vote on the deal.

If all conditions are satisfied, the takeover is expected to be implemented early in the second quarter, the company said.

While there was the possibility of a higher bid, Jarden’s Hooper said it appeared less likely at this stage of the process.